Malaysia's 2013 inflation forecast dipped to 2%

But inflation is pegged to to rise to 2.5%.

DBS has lowered our inflation forecasts for 2013 and 2014 to 2.0% and 2.4% respectively. 

These are down from our earlier estimates of 2.8% and 3.2%. Most recent April CPI inflation continued to show that inflationary pressure within the economy has remained benign, even despite the festive season demand spike and the pre-election spending.

Here's more from DBS:

The headline number registered just 1.7% YoY in April. This is just slightly above the average inflation of 1.5% in the first three months of the year.

While we expect inflation to rise gradually to about 2.4-2.5% by year end, the trajectory of inflation has turned out lower than we previously anticipated thus far. With this is mind, we have lowered our inflation forecasts for 2013 and 2014.

While there has been concern that the recent currency depreciation will stoke higher imported inflation, the external inflationary pressure has been low due to weak global growth. Coupled with the domestic price stability (subsidy) programme, which will not be unwound in the near term due to risk of political backlash, inflation is unlikely to rise above the 3.0% level in the coming months.

In short, the gap between inflation and the Overnight Policy Rate (OPR) will remain and the real policy rate will stay in the positive range.